Tuesday, May 13, 2008

Jim Prevor, who writes and publishes the Perishable Pundit food and grocery industry blog, writes today about a recent visit he made to two Fresh & Easy grocery stores in the Southern California desert region cities of Indio and Palm Desert.

Fresh & Easy Buzz visited both of these stores when in the region recently as well.

As a metaphor for a larger issue (as well as a factual comparison), Mr. Prevor calls the two stores, which aren't far from one another, "Tale of Two Tescos."

This is due in the non-metaphorical aspect of this piece to the fact the Indio store is in a new, built from the ground up building, while the Palm Desert store is in a converted former retail store building, like most of the current 61 Fresh & Easy grocery stores in Southern California, Arizona and Nevada are.

The contrast between the two Fresh & Easy grocery store buildings wouldn't be lost on Charles Dickens, if one may be given permission to make an analogy between a great work of sociological-inspired literature and two grocery store buildings.

While visiting the two stores we noticed the same thing as Mr. Prevor did: the Indio store is open, warmer and more welcoming, has lots of natural light, offers cleaner lines, and is clearly much more energy efficient in terms of being built to "greener" building standards than the converted retail store in Palm Desert. It's built to Tesco Fresh & Easy new store prototype.

Last weekend while at the Food Marketing Institute (FMI) convention in Las Vegas, we visited a number of that region's Fresh & Easy stores, including a store like the one in Indio built from the ground up. The other Las Vegas Metro region stores we visited were all in former retail buildings which Tesco has remodeled into its Fresh & Easy format.

The contrast between the new Las Vegas store and the others in the area were striking to us as was the case when we compared and contrasted the Indio store with most of the other converted- building Fresh & Easy markets in Southern California, including the Palm Desert unit.

In his piece today, Mr. Prevor also talks about some weekly sales numbers he has, according to information from his sources. He says he is finding some Fresh & Easy stores doing $100,000 -to- $120,000 a week, "but we are also finding many stores stuck in the $50,000 -to- $60,000 -a-week range," he writes.

Since earlier this year, Fresh & Easy Buzz has suggested overall per-store, per-week sales at Tesco's Fresh & Easy grocery chain are in the $60,000 (low range) -to- $100,000 range, based on information from our sources. Our current analysis is today's number is closer to the $100,000 figure than the $60,000 sales number.

Other analysts have offered estimates of $50,000 -to- 60,000 a week in sales. However, based on our source information, we've said that's too low.

We also have continued to make the point that only estimating in a range--like the $60,000 -to- 100,000 range we've offered--is appropriate unless one's source is the CFO of Tesco, or someone very close to that position.

Mr. Prevor's current weekly sales estimates are right in line with those we've been offering for nearly five months.

Based on our source information, we've been seeing an improvement in sales at some of the stores. Even more interesting--but logical--is that a number of the better performing stores have seen sales increases. Most of the poorly performing stores continue to do so.

The data that a number of the already previously better performing stores have seen sales increases doesn't surprise us since we've been arguing one of the problems Fresh & Easy has is that it's put numerous stores into buildings which previously housed supermarkets like Albertsons and Ralphs, and drug stores like Rite Aid. These retailers closed their respective stores in those buildings and locations for a number of reasons. One of those key reasons is because the stores were underperforming in sales in the locations.

From what we've been able to determine, one can trace many of the poorest performing Fresh & Easy stores to previously poor performing (under other ownership) retail locations, be they former supermarkets or other retail format stores.

As a result, as we've written before, we believe a number of the current 61 Fresh & Easy stores are located in proven underperforming locations.

This doesn't mean Tesco can't get the stores in the locations to eventually perform well. But it does mean the probability of the grocer doing so is considerably less than if it had used more optimum location picking strategies, rather than being driven more by the availability of empty retail buildings than by the potential of the site to perform. The empty building primacy was less than optimum in other words.

The more built from the ground up stores for Tesco, the better, in our analysis.

For example, we recently visited the site of the future Fresh & Easy grocery market in San Francisco's low-income Bayview-Hunters Point neighborhood. The Fresh & Easy store will be the ground floor retail anchor of a primarily residential but mixed-use condominium complex currently being built.

The ground floor location is optimum, as is the geographical location of the store for Tesco. It's a low-income neighborhood but it is rapidly changing and gentrifying in many ways.

Plus the neighborhood is underserved by supermarkets, as in only one for a neighborhood of perhaps 100,000 residents, and another who knows how many tens of thousands who go through the neighborhood each day in their cars or on the city's municipal transportation system.

Why it's a good location: There are no other grocer stores in the neighborhood, the complex is right on a major public transportation line, and with all the current housing in the neighborhood, plus all the new residents who will move into the new complex, there's a built in customer base for the store.

We aren't predicting here of course, but it wouldn't surprise Fresh & Easy Buzz if not too long after this San Francisco store opens next year, it becomes the number one performing Fresh & Easy grocery market in the fledgling chain, or very close to it.

But you say...if that couldn't just be the case with all of the 61 current stores. And it isn't.

Like we've often suggested though, there's plenty of time to change that, assuming the correct strategic decisions are made, executed well, and communicated comprehensively.

About Me

Fresh & Easy Buzz is an independent Blog and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market or any of its competitors.
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